Vietnam Market Watch: 7-Eleven’s Expansion, EU Investor Confidence, and Da Nang’s Struggles to Attract Investment
7-Eleven Expected in 2018
Vietnam’s first 7-Eleven convenience store is expected to open in February 2018 due to easier rules on establishment of a new business and strong growth in the retail sector. In May, the government had announced easier procedures for opening small shops with floor space of 500 square meters or less; the rule is expected to be implemented by the end of the year. The retail market is expected to reach US$179 billion by 2020, thanks to a growing middle class. 7-Eleven Inc. has reached an agreement with IFB Holdings which also runs the Pizza Hut chain in the country to open the store. The first store is expected to open in Ho Chi Minh City and 100 stores are planned in the first three years of operation.
The Vietnam Chamber of Commerce and Industry (VCCI) has stated that local retail market will see strong competition due to agreements from the Trans-Pacific Partnership (TPP) as well as EU investors. Under the TPP, Vietnam will allow more goods and electronic products to enter the domestic retail market. Japan’s FamilyMart and Ministop convenience stores are already present in the country. While local retailers are responding to the competition, the retail market is expected to have strong competition further benefitting consumers.
EU Investors Upbeat on Business Climate
EU investors plan to increase investment in Vietnam and have indicated positive sentiment on the business environment according to the Business Climate Index (BCI) survey for the second quarter. The survey was conducted by the European Chamber of Commerce in Vietnam (EuroCham). The developments bode well for the implementation of the European Union-Vietnam free trade agreement (EUVFTA), which is expected to help business and investment activities by foreign enterprises in the country. The EUVFTA is expected to come into effect in 2018. EuroCham also stated that it has seen more interest from small and medium-sized enterprises (SMEs) to enter the country.
Statistics from the Ministry of Industry and Trade (MoTT) show that two-way trade between the EU and Vietnam reached US$21.2 billion in the first seven months of the year, up 9.05 percent compared to the same period last year. Vietnam has exported several products including textile, garment, footwear, coffee, seafood and computers. Vietnam also imported machines, equipment tools, pharmaceutical products and milk products which it lacked. Officials at MoTT have further stated that EU is considered one of the key trade and economic development partners and that local businesses should take initiatives to make the most of the preferential treatment offered by the EUVFTA.
Da Nang Struggles to Attract Investment
Reports indicate that while the city of Da Nang licensed five FDI projects with a capital of US$8.3 million and US$13 million of domestic projects, they are yet to achieve major success. Covering a variety of sectors including textiles, machinery, engineering and food processing, a recently study showed that Da Nang’s economy continues to be dominated by micro and small enterprises, with only a few businesses reporting turnover in excess of US$100 million. While the city’s authorities have introduced some support policies and incentives, product competitiveness remain low and utilization of these programs has been slow to increase.
Studies have showed that apart from factors such as land, incentive policies and human resources, other cases such as low investment attraction, unfocused investment promotions, lack of coordination among relevant agencies and time consuming administrative procedures have contributed to the worsening business climate in the city. Recent reports indicate that while 30 coastal tourism projects with a total value of US$2.1 billion were licensed since 2006, most have not been started due to financial difficulties. City officials are planning to withdraw licenses and redraw the boundaries so that they can develop the land into public beaches. While Da Nang has great potential to increase FDI, the government will need to make further business friendly policies and offer incentives for businesses to consider it as an investment destination.
Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email email@example.com or visit www.dezshira.com.
Stay up to date with the latest business and investment trends in Asia by subscribing to our complimentary update service featuring news, commentary and regulatory insight.
Annual Audit and Compliance in Vietnam 2016
In this issue of Vietnam Briefing, we address pressing changes to audit procedures in 2016, and provide guidance on how to ensure that compliance tasks are completed in an efficient and effective manner. We highlight the continued convergence of VAS with IFRS, discuss the emergence of e-filing, and provide step-by-step instructions on audit and compliance procedures for Foreign Owned Enterprises (FOEs) as well as Representative Offices (ROs).
Navigating the Vietnam Supply Chain
In this edition of Vietnam Briefing, we discuss the advantages of the Vietnamese market over its regional competition and highlight where and how to implement successful investment projects. We examine tariff reduction schedules within the ACFTA and TPP, highlight considerations with regard to rules of origin, and outline the benefits of investing in Vietnam’s growing economic zones. Finally, we provide expert insight into the issues surrounding the creation of 100 percent Foreign Owned Enterprise in Vietnam.
Tax, Accounting and Audit in Vietnam 2016 (2nd Edition)
This edition of Tax, Accounting, and Audit in Vietnam, updated for 2016, offers a comprehensive overview of the major taxes foreign investors are likely to encounter when establishing or operating a business in Vietnam, as well as other tax-relevant obligations. This concise, detailed, yet pragmatic guide is ideal for CFOs, compliance officers and heads of accounting who must navigate Vietnam’s complex tax and accounting landscape in order to effectively manage and strategically plan their Vietnam operations.
- Previous Article Vietnam Updates Fines for Investment Violations
- Next Article Vietnam Regulatory Brief: Trade with Brunei, Tax Incentives, and a Looming Pokemon Go Ban